WeChat receives warning from Thailand Central Bank, signaling a possible foreign markets dilemma

Written by Kaiyu Xu, Denis Suslov || June 03 2016

Over the past few years, Alipay, WeChat, and other mobile financial and non-financial platforms have become ubiquitous in China. This ubiquity has led to a fiercely competitive market, so increasingly these companies have begun to look overseas, expanding into foreign markets including Japan, Korea, and Southeast Asia. Although they are tremendously successful domestically, China's large tech players face multiple challenges when expanding abroad including regulation, which has become a real challenge for Tencent in Thailand as of late. 

20160603 WeChat receives warning from Thailand Central Bank signaling a possible foreign markets dilemma

According to the Central Bank of Thailand there are no restrictions on local merchants using foreign online payment systems in the country but the regulator has released warnings to domestic merchants on the careful usage of such payment methods to avoid security risks. As a result, local businesses will have to balance accepting foreign payment options to attract more consumers while also being cautious about assumed security risks. More specifically the regulator had singled out WeChat pay with a warning about its operations in the country. 

Before WeChat Pay, Alipay had faced a similar situation in both Hong Kong and Taiwan in 2014. Alipay had launched its 'face to face payment' which used QR codes. This method quickly gained traction and was soon used by numerous businesses including the Hong Kong OK Convenience Store, Zhuoyue, Giordano, and Uni-Supermarket in Taipei. Soon after the launch, both Alipay and Uni-Supermarket in Taipei were accused of violating the financial operation regulations. As a result, many local merchants stopped using Alipay payment options.

Alipay was the first of China's big tech to really expand its payment business outside of Mainland China when they entered Hong Kong in 2007. Tencent's WeChat Pay, which is spreading fast domestically, has only recently officially announced its international expansion. WeChat has setup partnerships with banks and provides payment services in over 20 countries. Baidu Wallet has a small number of customers in China and in April released its overseas payment services in Thailand and now covers over 400 merchants with plans to expand in Korea, Japan, Hong Kong, Macao, and Taiwan.

Chinese companies expanding abroad face many difficulties, including differences in language, and business culture. Therefore, companies should have in-depth knowledge about local regulations, consumers and the business environment. But by hiring teams with understanding of the local market and doing forward-looking research Chinese companies mitigate most of the risks, but still they are not fully protected from events similar to those happened in Thailand, Hong Kong and Taiwan.

Going back to the basics and taking the time and effort to develop relationships with the local regulators will be key. Given that China's tech companies have all had to do this in China already, this should be easy for them, but only time will tell if they can translate their domestic strength to international success.